How T-Mobile and John Legere are shaking things up

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Carriers in the U.S. have an iron grip on the mobile phone industry. As a result, Americans pay more on average for cell service, particularly wireless data, than the rest of the world does. For years now, the standard setup has locked consumers into a two-year contract with limited possibility of parole. In return for a cheap or free smartphone upfront, consumers sign on to expensive contracts that bring in big profits for carriers and the only way out is to pay a hefty early termination fee (ETF).

Over the last year or so one company has been shaking things up and threatening the status quo with a lot of fancy new ideas. T-Mobile, led by maverick John Legere, has introduced a new way of doing things without the standard two-year contract lock in. Determined to climb from a distant 4th place in the market and get competitive again, the self-branded “Uncarrier” has been improving its network, introducing transparent pricing that’s fairer, and throwing in incentives like free international roaming.

The competition has been forced to respond to T-Mobile’s many broadsides, including its offer to pay up to $650 with its ETF buyout plan, designed to get families to ditch their current carriers, trade in their handsets, and sign up with T-Mobile. There’s no doubt the other big three are running scared and we’re finally seeing some genuine competition.

How did this happen?

Turn the ship around!

Cast your mind back two years and T-Mobile was fast becoming irrelevant, trailing behind AT&T, Verizon, and Sprint. It didn’t have the iPhone, it didn’t have the best choice of Android smartphones, and it didn’t have a 4G LTE network. There was a failed attempt to sell the company to AT&T in 2011. After that didn’t come off, parent company Deutsche Telekom decided to invest the cash needed to build an LTE network and reboot the brand. It soon became clear that things would not be improving overnight. The second quarter results for 2012 showed customer losses of 205,000, and, around the same time, a JD Power study put T-Mobile last in terms of customer care performance.

Enter John Legere

In September 2012, T-Mobile appointed Legere as the new CEO and he set about changing its fortunes. No stranger to the telecommunications industry, Legere was with AT&T for nearly 20 years, before working at Dell, and then serving as the CEO of Global Crossing for a decade. Upon joining T-Mobile he wasted no time in formulating a plan to shake up the industry, and he had no qualms about criticizing the competition in the process.

What a stupid, broken, arrogant industry - John Legere about US carriers

In January 2013, Legere stole the headlines at CES when he took to the stage in a t-shirt and baseball cap to unveil what T-Mobile’s new “Uncarrier” branding was all about. A contract-free unlimited plan including unlimited data, texts, and calls for $70 per month. Customers could pay full price for a new smartphone or bring their existing device with them.

He was shockingly open and honest, joking on stage with reporters. He even called AT&T’s network “crap” and vowed to deliver a better deal for customers. He also explained that the new philosophy was all about tackling pain points that are common across all customers, namely lack of transparency in the billing structure, overage charges, and a lack of flexibility with contracts that tie people down.

Keeping it simple

In March, Legere and T-Mobile expanded the vision further. New Simple Choice plans would deliver unlimited texts and calls with 500MB of data for $50 per month, 2.5GB of data for $60 per month, and unlimited data for $70 per month. Customers would also have the option of starting a separate device plan to buy a new smartphone for a low upfront cost and then pay it off in 24 monthly installments. They could leave at any time, but they’d still have to pay the remaining balance on the device. Alternatively they could buy a new full price phone or bring their existing device with them.

Things got a little more complicated in July when the company announced its JUMP program at an extra $10 per month, which offers the chance to upgrade twice a year, as long as you’ve been on the plan for at least six months. That means you can hand back your existing device and buy a new one more often, but you’ll pay a premium for the privilege.

In October, T-Mobile kept the momentum rolling with free data for life for tablets. Customers would get 200MB of free data every month with any tablet for as long as they own and use the device on T-Mobile’s network.

Winning new customers

For the full year of 2012 T-Mobile claimed net customer additions of 203,000. Signs that the new strategy is working were there for all to see in T-Mobile’s 2013 results, total net customer additions of 4.4 million for the year.

Expectations were heightened for CES this year as the outspoken Legere took to the stage and offered an ETF buyout plan aimed at families. He explained, “We’re giving families a ‘Get Out of Jail Free Card. Carriers have counted on staggered contract end dates and hefty early termination fees to keep people bound to them forever. But now families can switch to T-Mobile without paying a single red cent to leave them behind.”

In an effort to preempt the plan AT&T offered T-Mobile customers up to $450 per line to switch, but T-Mobile’s announcement trumped that by offering up to $650. Customers would get $300 for trading in their existing AT&T, Verizon, or Sprint handset and sign up for a T-Mobile plan, followed by another $350 to pay off the early termination fees.

Expanding the network

In terms of coverage and speed T-Mobile has been playing catch up. It is still rolling out 4G LTE and recently announced plans to upgrade its 2G network to 4G LTE to cover 250 million US customers by the end of the year. Verizon’s current claims about having the best coverage don’t take T-Mobile’s HSPA+ network into account, which has got Legere speaking out again, “Verizon’s ink blots massively understate our coverage and don’t begin to represent the actual customer experience on T-Mobile’s network.”

T-Mobile has expanded quickly and because it has fewer customers right now there’s more bandwidth available to deliver faster speeds. If you live in a big city, then T-Mobile’s coverage is likely to be comparable to or better than the competition, but that’s probably not the case elsewhere.

On T-Mobile’s place in the industry: “If you thought we went away, if you thought T-Mobile wasn’t going to be a significant player in this industry, think again.”

What’s next?

It’s not clear if Deutsche Telekom is still looking to sell T-Mobile. Now that its fortunes are turning around, it could command a tempting chunk of change, and there have been persistent rumors that Sprint might be interested in buying, or a merger may be on the cards. Whether the US DOJ Antitrust Division would allow it is another matter — it did block the AT&T acquisition a few years ago.

Whatever happens next, one thing is for certain, T-Mobile is on the up and the other three major carriers are struggling to come up with an answer. Even if you don’t want to make the switch to T-Mobile you could still benefit from the moves it’s making as Sprint, AT&T, and Verizon try to counter with new deals of their own.

over the last 24 Months John Legere has been the most effective CEO in wireless, by far!

Oli72

Totally agree.

smokebomb

T-Mobile hasn’t necessarily done something new, they’ve just returned things to how they should be in a free, capitalist market: competitive.

Victor Who

Totally agree.

wezi427

I agree, Verizon will only change when they lose customers. The fact they have given up the unlimited data was a disgrace to existing customers. They should have limited data to new customers at the least.

Jmdolphin

Simple unlimited data and the masses will come running

wezi427

I’ve have said this before, I hate Verizon. I want to leave and go to T-Mobile, but the coverage in my area is sub-par. When they are close to the coverage, I’ll switch.

Peerpressure

Speaking as someone who was on cingular first, then on to AT&T when they were bought out, I made the switch to T-mobile. I traded in my Galaxy s$ and got a LG G2, and I could not be happier. Once we pay off our phones, we’ll be paying $90 /month with all the taxes and fees tacked on, but it’s $50 better than AT&T. and if I want, I can bump up to 2.5 GB of data for just $10 more. oh, and the 4G LTE is fast fast fast. I love it

Aar0nC

As long as they keep on giving straight talk access to their network for only $45 a month, then I have nothing to complain about. Cheapest plan available for unlimited talk text and 2.5 GB of data… Definitely can’t complain when comparing to the $90 a month my friends pay for similar service with sprint.

Noel

I have commented on similar points on a few sites. The presence and viability of Tmobile is crucial for the US mobile market. Because of their disruptive influence and acting as a catalyst of change, has forced the other members of the big four to make adjustments that in turn have also benefited their customer.
So all the talk of Sprint buying Tmobile Or Sprint and Co waiting to buy Tmo before they launch a price war won’t fly…the DOJ, FCC and the masses who care to have a viable and disruptive Tmobile won’t bite on that apple. Nothing is stopping them from starting that price war now…just as nothing is stopping Tmo from moving ahead with their own price plans. Competition is really sweeeeet….all consumers benefit.

AlexFirth91

It should be the other way around, Sprint is a weaker network T-Mobile would consider owning, not SprintBank purchasing Magenta. I’m living in Manhattan, and I was laughing at an ad on the A train: Wireless network/ free wi-fi support from AT&T, T-Mobile & Verizon, and soon on Sprint.

AlexFirth91

Just switched, my 64gb 5S arrives tomorrow, and I’m actually getting a better plan, unlimited calling. With Verizon I have unlimited data/text but only 450 minutes for 100 a month. Now for 5 bucks less, I’m getting all unlimited, and 20 cents a minute unlimited data when I go to Spain this summer. My sister is in Canada right now, 80 cents a minute, no free data.

Michael Samsara

FYI. Lest you have even a moment of speed download envy or “buyers remorse” for switiching.

If you should happen to read the article that was posted on Laptop’s site about how Verizon is – my paraphrasing here – faster than fast, the hostess with the mostess, the cat’s meow and the one to beat all over town and all around – re Verizon beating out everyone else in New York City – a word to the wise – read down to the end of the article – unless you like operate with a misconception based on an Apple to Oranges comparison.

Because, at the end of the article you will find that what was tested were regular LTE phones from T-Mobile, AT&T and Sprint – and the faster AWS tech that was on the Verizon phone used.

It is of course great that Verizon has that capability – but if the article really wanted to be fairer than fair – it would have given us full disclosure at the beginning not the end of the article; and tested both a regular Verizon LTE device AND the newer version (which given only 30 percent currently of Verizon’s line up is AWS capable means only a fraction of their own people ever do, or are even able, to get the speeds that were presented as a fait accompli – written in stone – fact, when in fact, for most it is anything but a fact of life.

AlexFirth91

Hey I know I had 4G with Verizon for 2 years, but I’d rather just enjoy the better benefits. I know with time T-Mobile will get stronger, but maybe this will convince verizon to bring back unlimited data once they see more switches or reluctance to upgrade.

GhanaRPCV

I think the best thing that happened to T-Mobile was AT&T refusal to buy them. I just got back from 2 1/2 years in West Africa and love the prepaid/top up way of doing things (buy the phone, buy a chip and you’re good to go). When I got back to the US, I swore off signing a contract. I bought a Moto G and saw what T-Mobile was doing to shake up the industry and jumped on to their network. I’m lucky enough to live in San Diego so the coverage is just fine for me.

Chris

At&t didn’t refuse to buy T Mobile. The Department of Justice and the FCC flat out rejected at&t’s attempt to buy T Mobile. And I for one am a happy T Mobile customer because of it!

AAT

Awesome article, interesting topic, and well-written! I love tech blogs about Android issues, but so many are just painful to read. Not this one, though–perfect grammar and usage, finally, from an author who knows tech and has quality writing skills. Hats off to you, sir. I’m a TMO customer and found the summary on point and intriguing. I look forward to reading more of your work.

-AAT

Simon Hill

Thank you sir, that’s very nice of you to say.

Michael Samsara

Really excellent article Simon. Thank you.

Jon Legere ain’t no dummy. He realizes the current situation is ripe for the picking for someone who actually has those things men are all supposed to be born with – because of their Y chromosomes. (So pleased with myself for thinking that one up!)

Many years ago Burger King used the same strategy and really, really pissed off McDonald’s in the process. I read about this is a book called Bottom Up Marketing by Al Ries and Jack Trout. Seems that Burger King was looking for a way to go after McDonald’s in a way that would be impossible for McDonald’s to respond to – in a timely or even remotely practical manner. What did they do?

They focused on the fact their burgers were “flame broiled” rather than as was the case with McDonald’s fried in their own grease on a griddle – naturally and in reality suggesting a healthier alternative – not to mention a more exciting visual picture for national TV.

McDonald’s went ape shit. Threatened to sue Burger King for “unfair advertising” or some other such BS, because they knew very well there was no way on earth they were going to be able to yank out hundreds of thousands of griddles from all the McDonald’s nation or world wide – and be able to counter by saying “We’re healthy too!”

Ultimately, McDonald’s settled down, got real and realized they had been out flanked by a competitor who had simply had the savvy, marketing and advertising acumen to employ one of the oldest tricks in the advertising and war books – hit your enemy where it is as impossible as possible for them to counter attack or respond.

Jon Legere and T-Mobile (gotta love that man and his advertising people) are doing exactly the same thing. They realize that Verizon and AT&T most especially, and Sprint to a similar but lesser degree, are so heavily vested in their cash cow, money making contract approach that they would have to change everything about themselves to be able to react in a truly effective manner.

Too bad for them – simply “ma vel ous” for T-Mobile.

Simon Hill

Thanks, much appreciated.

Interesting stuff, I’ll look out for that book, sounds good.

Michael Samsara

Bottom Up Marketing was written in 1990.

Ries and Trout’s approach is simple in its elegance yet sophisticated as can be in its intellectual, creative underpinnings and – consequently – effective in effect.

As I see it, they are suggesting that one use commonsense, which, according to Will Rodgers, “Is never in short supply, because so few people ever use it.”

They instruct people to look carefully at their market and who populates it; really study it, and look for the point – the one proposition within that market – that YOU can best serve, that the competition can’t easily compete on or even – as in the case of Verizon, AT&T and Sprint – respond to in a credible fashion – except to disparage you and try to cast you in the role of someone the public should fear. Thus – they hope – people will come to view them as the safe haven to turn to for comfort, solace and refuge – from all manner of dire circumstances they are suggesting will befall all who sadly, foolishly choose to go with the evil usurper intruding upon their God given domains.

or words to that effect! lol

Michael Talon Marshall

I switched to T-mobile. I went from an iPhone 4s which T-mobile paid me $225 for, to a Galaxy S4. I pay less for unlimited everything, and get “4G” LTE They bought my contract and even with jump and a lifetime warrant I’m still paying less than what I was in Sprint ! Plus I don’t void the warrant for replacing a battery or god forbid expanding the memory. That last part is more a shot at Apple, but still really happy. At the least it’ll force the market to shift, or Verizon and AT&T will hire a hitman to assassinate Legere. Either or. But really happy with T-mobile.